Do Managerial Objectives Drive Bad Acquisitions?

ABSTRACT

In a sample of 326 US acquisitions between 1975 and 1987, three types of acquisitions have systematically lower and predominantly
negative announcement period returns to bidding firms. The returns to bidding shareholders are lower when their firm diversifies,
when it buys a rapidly growing target, and when its managers performed poorly before the acquisition. These results suggest
that managerial objectives may drive acquisitions that reduce bidding firms' values.